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The Impact of Immigration on US Workers

STEPHEN YALE-LOEHR: Let's talk about the impact of immigration on US workers. In my view, immigration is good for the overall US economy for the following reasons. A recent study by economists Richard Vedder, Lowell Gallaway, and Stephen Moore argues that immigration opens up opportunities for natives in the following four ways.
Number one, immigrants contribute to population size increase, thereby increasing overall consumption. Second, immigrants bring savings with them to the United States, which can serve as capital to investments. That, in turn, is more productive output. Third, immigrants have high likelihoods of starting their own businesses, which can then create new jobs for natives. Fourth, immigrants contribute in terms of capital savings and the growth in the expansion of the US markets.
I don't think that immigration hurts native minorities. A 2001 study conducted by the Urban Institute and data collected by the National Academy of Sciences found that the positions of black males in areas of high immigration population in the 1980s was not hurt by immigrants. Their position was no worse if they were in high immigrant populations or in areas of low, or no, or little immigration.
Additionally, the study found that the economic position of black men in regions with high immigrant concentrations did not deteriorate during the 1980s. Immigrants do not displace Americans from jobs. Even if you look at the local level.
Jeffrey Passel of the Urban Institute reports that his research between 1994 and 2001 shows no evidence that immigrants generate negative affects for native laborers on the local level, just as there is no evidence of job displacement at the national level. The current distribution of immigrants at both ends of the US workplace spectrum also provides a valuable labor pool for the near future. The US population is getting older. As the baby boomer generation begins to retire, many positions will open up, for which we do not have enough US workers.
Additionally, the aggregate native US population is becoming more educated, and thus abandoning lesser skilled jobs. Currently less than 10% of the US native population fails to complete high school. We need people to be able to fill these jobs. These are our essential workers of the future.
Also you have to remember the number of US jobs is not fixed. Although some argue that competition for jobs among individuals, both natives and immigrants, is fierce because there is a static number of jobs available, that reasoning is false. The US Bureau of Labor statistic reports that between 1990 and 2003, the United States experienced an increase of 15 million jobs.
The Bureau also predicted that 33 million jobs, 58% of all new jobs that demand only moderate or no job previous experience, will open up by 2010. These types of jobs are attractive options for immigrant workers, if for no other reason than we simply lack enough US workers to be able to fill them. Next, let's talk about the net effect of immigrants on wages for the overall economy.
Some economists, such as George Borjas of Harvard University, argue that immigrant labor produces a downward pressure on wage rates for natives, particularly for those who do not finish high school. This argument, however, is false, according to Columbia University economist Francisco Rivera-Batiz. Borjas asserts that wage decreases are hard to identify because those individuals who are most affected by the presence of large numbers of immigrants move away in search of better job prospects.
Rivera-Batiz counters this assertion with data that demonstrates that the only natives who do move away in search of better jobs are already college educated, and therefore are not significantly threatened by immigrants in search of work. The absence of evidence illustrating a decline in wage rates at the national level relative to high immigrant populations, therefore, is not attributable to native out migration. Additionally, several academic studies report that wages are only minimally reduced in areas of high immigrant concentration.
To the extent that there are decreases in aggregate wages, it's important to note that the immigrant labor is certainly not the only possible cross. The current labor market is dominated, for the most part, by companies that can well move their workers offshore, and therefore can demand lower wages from their people in the United States, whether they are US workers or not. That affects everyone in the United States, not just US native workers.
While a decline in average wages is presented as evidence of the negative impact that immigrant labor brings to the United States economy, a 1997 study by the National Research Council calculates that overall, immigration is a positive impact on our economy to the tune of between $1 and $10 billion a year. Next, let's talk about primary areas of jobs competition. This table over here illustrates the distribution and concentration of immigrants and natives in various employment sectors.
The upper grouping shows jobs where there are fewer immigrants than normal whereas the lower bracket shows jobs in which the percentage of immigrant workers is greater than that proportionately represented in our population. We see that immigration is currently concentrated in employment sectors of low skill jobs, particularly those that don't require much education. There are also a fair number of immigrants in high end occupations.
For example, over the last 10 years, foreign nationals earned more than 57% of all engineering PhDs. Thus, immigrants tend to be clustered both on the high end and the low end of the US economy. If we look at the fiscal impacts of immigrants, we see that this is reflected as well too. For example, the National Research Council in 1997 found that if you look at high end immigrants, meaning those who have at least a high school education, their net positive contribution over the course of their lifetime is $198,000.
By contrast, those immigrants who come to the United States with less than a high school education are a net drain on our economy over their lifetime of about $13,000. Thus, if we wanted to maximize simply the fiscal impact from our immigration policy, we'd want to bring in only those immigrants who have a high school education or higher. How does immigration's impact relate or compare with the effects that corporate job outsourcing and relocation abroad have exacted on wage labor and employment demands?
From a purely economic standpoint, the influx of immigrants may be seen as a source of labor for industries in the United States. This labor supply arguably enhances the ability of US industry to be able to compare favorably with occupations and companies overseas. While overseas outsourcing is a threat that employers can see and use as leverage against their employees, both US and immigrants, to dismiss workers demands, it's not yet occurring at a large rate, in my view.
The threat of relocation, however, certainly contributes to the weakened positions of labor unions in the United States. That affects both immigrants and native US workers. In 2001, only 0.6 of 1% of layoffs were trade related, according to the Public Administration Source. Only 3% to 4% of companies are actually moving their production facilities abroad.
The Forrester Research Consulting Group reported that by 2015, 3.3 million service sector jobs are expected to move overseas. While that number seems high, you have to remember that quarterly job losses alone amount to seven or eight million, and that there are over 78 million jobs in the overall US service sector, according to a 1995 report by the US Department of Commerce. Service sector jobs constitute an enormous number of industries, including banking and insurance, travel, entertainment, savings, information, telecommunications, health care, education, transportation, energy, and environmental services.
Primarily only low wage service jobs are going overseas. Hospitality, restaurant, and health care service kinds of jobs cannot be moved abroad because they have to be in proximity to the people that they serve. These are the jobs for which we lack enough US workers.
Now let's talk in more depth about the impact of immigration on US wages. Proponents on both sides of this argument have studies to back them up. For example, a recent article called "Increasing the Supply of Labor Through Immigration: Measuring the Impact on Native-born Workers" by Harvard economist George Borjas criticizes the predominant methodology that the majority of other studies have used to determine the impact of immigration on US wages.
Before Borjas' research, other studies that tried to quantify the impact of immigrant labor on native workers' wages calculated the correlation between local native wages and local numbers of immigrants. The correlation for multiple cities, some with large immigrant populations, others with little or no immigrant populations, was then compared.
These studies found that there was little or no correlation between wage rates and the numbers of immigrants. Analysts have attributed the minimal number of immigrants or the minimal impact of immigrants on the labor market with their willingness to accept jobs that US workers are not willing to take. This data continues to fuel the pro-immigrant position, that immigration does not adversely affect US workers' positions.
Borjas identifies two major criticisms of this previous methodology. The first is that immigrants often cluster in cities with stronger economies. Borjas argues that the independent strength and superiority of those economies relative to areas with fewer immigrants hides the negative impacts that immigrants bring. Second, Borjas suggests that natives may respond to the perception that their wages are going down because of immigrants by moving away from areas of high immigrant populations to areas with fewer immigrants.
Such movement would make it difficult, he argues, to identify wage effects at a local level. To compensate for these potential hidden effects on immigrant labor on wages, Borjas conducted a study that analyzed trends in wage rates at the national level. He concluded that when the number of workers in a particular area increases by 10%, for example, because of a lot of immigrants, annual wages for that group decreases by 7.1%.
He explains that this is because of the negative impact that immigration has on both weekly earnings and on the number of annual hours worked. In some, Borjas concludes, immigration has an adverse effect on both the wages and employment of competing native workers. While Borjas' new data is intriguing, it raises more questions than it answers.
In an effort to refute the pro-immigration argument that immigrants help to fill the jobs that natives don't want, Borjas argues that those cities with fewer immigrants compensate by giving larger wages to those people. He gives as an example a comparison of the cheaper New York City cab industry, 80% of which is comprised of foreign-born workers, with a slightly pricier Detroit taxi cab service, only 10% of which are non-natives. Simply because Detroit doesn't have as many immigrants as New York, he concludes, doesn't mean that its taxi industry is dormant.
This argument, however, raises the question, at what point does the higher cost of services that result from higher wages cancel out the financial benefits of those higher wages for workers. We simply don't know the answer to that question. In conclusion, the data used to support the arguments made by both pro-immigrant and restrictionists generally don't answer the questions.
There's a lot of dispute and controversy in this area. And you have to look both at the quantitative data and the qualitative impact of that data to be able to make an intelligent decision in this area.

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Immigration is a key controversy in the United States:
Does immigration help or hurt the U.S. economy?
Do immigrants take jobs from U.S. native born workers or create new jobs?
Should we restrict immigration or allow more people to immigrate?
What should we do about the estimated 8-9 million undocumented noncitizens now living in the United States?

This CyberTower room will familiarize you with the key historical, policy and legal issues to allow you to engage intelligently in this debate.

The stakes involved are high and often presented as mutually exclusive entities; jobs for natives vs. non-natives; the value of cultural diversity vs. the pressure for assimilation; the debate over whether immigration helps or hurts the United States.